Taxable capital gainAt the MacKay Group Wealth Management of RBC Dominion Securities, we understand that raising funds for your charity can be a major challenge. One way you can substantially increase your charity's fundraising dollars is by opening and promoting a gift of stock account. This fundraising strategy is especially effective given recent tax changes that eliminated the capital gains tax completely on donations of qualified stock.
Maximizing charitable gifts
This special tax exemption greatly reduces the after-tax cost of donating stocks – potentially enabling donators to give more. The following table shows the difference between selling shares first, paying taxes, then giving the proceeds and simply donating the shares directly.
The tax benefit of donating shares
| | Selling shares and donating cash | Selling shares and donating cash |
| Value of donation | $100,000 | $100,000 |
| Original cost | $10,000 | $10,000 |
| Capital gain | $90,000 | $90,000 |
| Taxable capital gain | $45,000 | $0 |
| Taxable capital gain | $20,250 | $0 |
| Donation tax credit | $45,000 | $45,000 |
| Net tax savings | $24,750 | $45,000 |
| Cost of gifts | $75,250 | $55,000 |
Assumes marginal tax rate and donation tax credit of 45%. Marginal rates and donation tax credits vary between provinces.
Encouraging gifts of stock
People can be motivated to donate stock for many reasons. They just may not be aware of the benefits or know that your organization can accept these gifts.
For example, active donors that do not have the cash on hand at the time of your fund-raising effort, or sophisticated investors that purchase tax-assisted investments with the specific purpose of funding a large donation. Tax deductions are received based on the full purchase cost and on the full market value on donation.
How we can help
The popularity of donating shares increases every year with large charitable organizations like the Princess Margaret Hospital Foundation's Give the Gift of Stock campaign. If you wish to explore this opportunity further, and learn how the MacKay Group Wealth Managment of RBC Dominion Securities can help, please contact us.
